Summary:
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UK PM May announces resignation
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Mixed reaction seen in the pound
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Oil on track for large weekly loss
Theresa May has announced that she will step down on Friday 7th June as the PM has confirmed the end of her tenure. There was a small move higher in the pound in response with the GBP/USD moving back above the $1.27 handle but these gains have since been pared somewhat and the focus now very much shifts to her replacement who could be in place as soon as the middle of July. The news itself is not really that positive for the pound in that the next Tory leader will likely take a more hardline approach to Brexit and as such the chance of a no-deal outcome has increased.
The pound briefly popped higher when the resignation was announced but has since fallen back lower and around 20 minutes since the news broke the market is back on its daily lows. Source: xStation
UK retail sales top forecasts
Despite the ongoing political instability, consumer spending in the UK seems to be holding up ok with the retail sales figures for April topping estimates and extending the run of above forecast releases for this data point to 4 months. Record growth for the online sector in the 3 months to April was one of the biggest contributors but it should be pointed out that while these readings are better than expected it is largely due to pessimistic forecasts rather than strong consumer spending. The general feeling is that the economy is continuing to plod along despite the high degree of uncertainty that hovers overhead.
Oil set for large weekly loss
The oil price is looking to recover this morning after its biggest loss of the year so far, with Brent crude tumbling more than 5% in Thursday’s session. The week had started brightly for oil, with the market jumping after comments from the Saudi energy minister which suggested the kingdom were willing to extend their production cuts, but the early promise has fizzled out and the size of the recent declines reveal an underlying fragility to the market. The plunge lower began on Wednesday afternoon when the US inventory reading rose for the 7th time in the past 9 weeks, suggesting that despite rising geopolitical tensions the market remains well supplied for now. The lion’s share of the focus has been on the supply side of the market due to fears of shortages but the demand side shouldn’t be overlooked, with the disappointing manufacturing figures from both the Eurozone and the US raising doubts about the health of the global economy and no doubt playing a part in the sell-off.
